Students dropping Benesse after data theft

Education company Benesse Holdings Inc. is losing subscribers to its “shinkenzemi” correspondence courses after confidence in its ability to protect their privacy was shaken by the massive data theft at Benesse Corp. last month.

The service, which operates by exchanging coursework through postal mail, is being challenged by the declining birthrate, the growing popularity of tutoring schools and the rise of online educational services.

Since many of those taking the shinkenzemi courses are toddlers and elementary school children, the subscriber exodus from Benesse Corp., which runs the correspondence service, is expected to accelerate.

On Thursday, Benesse Holdings canceled its group earnings forecasts for fiscal 2014 because of the uncertainty being caused by the data leak, in which more than 10 million pieces of personal information on customers were stolen and sold on. The accused, a systems engineer, was arrested on July 17.

The number of shinkenzemi subscribers stood at around 4 million from 2008 to 2012, but had dropped to 3.65 million by April 2014.

Benesse’s Kodomo Challenge courses for preschoolers, branded with a tigerlike mascot named Shimajiro, are faring well along with its elementary school courses, with subscribers reaching 1.02 million and 1.66 million, respectively, so far this year.

But its courses for junior high and high school students are slumping as more students turn to tutoring schools to prepare for entrance exams. The courses have attracted 690,000 and 280,000 subscribers, respectively, so far this year.

“Multiple factors have led to the slump of Shinkenzemi courses, such as the tendency to switch from correspondence courses to tutoring schools and the spread of online education services using tablets,” said Kyoichiro Shigemura, senior analyst at Nomura Securities Co.

With the number of double-income households on the rise in Japan, tutoring schools are becoming popular as busy parents leave mentoring duties to teachers, unlike correspondence courses, which often require parental help, Shigemura said.

At the same time, low-priced online services catering to students preparing for college entrance exams are on the rise, challenging conventional correspondence education services, an official at a prep school said, noting that price competition is growing.

Taking a different tack is Manavee, a Tokyo-based nonprofit organization that distributes videos of actual classes over the Internet for free. Manavee’s aim is to eliminate regional and economic differences among students preparing for college entrance exams.

Manavee said its cumulative user count has climbed to 950,000 since launching the video distribution service in 2010.

Recruit Holdings Co., the information service and staffing giant, offers an online education service called Juken Suppli that is focuses on college entrance exams. It offers videos of classes held by popular private prep school teachers that can be viewed as many times as desired for a flat monthly fee of ¥980.

“We are entering an era of free study materials,” Eiko Harada, chairman and president of Benesse Holdings, said, hinting that the company plans to increase supplementary digital materials while retaining paper materials at the core of its services.

The company is also hoping to recover by strengthening cooperation with affiliated tutoring schools.